Pricing and Ratemaking in Plain English

Learn the pricing skills and rate making concepts and techniques that will let you do your own pricing, or support your company’s actuaries. In just two days, and in plain English, this comprehensive seminar will show you:

  1. How to make a profit in every segment of your business
  2. How rate relativities make pricing easier and rate comparisons simpler
  3. How to avoid adverse selection through better understanding of market segmentation and risk selection
  4. What effect your expense ratio, reserves, tails, loss development and credibility have on your ability to properly price your products
  5. How to easily handle your own rate revisions, even without the help of an actuary

You can handle the pricing for your products if you can add, subtract, multiply and divide.

That may sound hard to believe, but it’s true. This seminar will teach you all the basic skills needed. It’s easy and can be done by almost anyone involved with product design or development, underwriting or marketing.

In fact, the real skill isn’t in the numbers at all. It’s in the concepts and ideas, and this seminar will cover them in a complete and easy-to-understand way. Rick Dorman, nationally-known P&C Insurance Consultant and successful seminar developer and speaker, has designed this comprehensive two-day program to teach you the hows, whys and whats of pricing and rate making. And best of all, it uses a “plain English” approach that you’ll grasp right from the beginning.

Some insurance people feel there’s a certain “mystique” to pricing and think only an actuary can set rates. Not so. After this two-day program, anyone in product design, underwriting, marketing or general management should be able to correctly set prices for their products in a way designed to make an underwriting profit. When you leave this course, you’ll have a practical understanding of all the essentials behind pricing and rate-making. You’ll learn, step-by-step, how to analyze your book of business and make profitable pricing decisions. You’ll also leave with a detailed workbook including both class and additional exercises that clearly demonstrates the approach. You will be ready to test your knowledge and put the skills to work the day you get back. This course doesn’t cover theory; it covers a full range of bottom-line, applicable skills.

The most successful P&C products require significant input and involvement from the people closest to the product and the market. Whether you expect to do the pricing yourself, or need to work with and understand the actuaries and others who handle the pricing, this seminar will give you the knowledge and skills you need and the confidence to create more profitable products.

Who should attend?

  1. Product managers, underwriting managers, marketing managers and others directly involved with the product.
  2. Actuarial trainees, analysts and support staff; product, pricing and rate analysts.
  3. Anyone who needs to understand the pricing and rate making aspects of their products.
  4. Anyone who needs additional knowledge to improve their product’s profitability.
  5. Anyone who works with actuaries and wants to better understand what they do and why.

What you will learn?

Risk Selection and Market Segmentation

How to determine good and bad risks. How to differentiate your product from your competition. How to profitably segment a market. Three ways to create profit making niche-markets.

Company Profitability and the Expense Ratio

What makes a product profitable. How the expense ratio critically affects your ability to price. How to figure the exact loss ratio needed to make a profit.

Rates and Relativities

What is a rate relativity. How relativities are used for product pricing. How an expense constant or policy fee affects pricing. Three methods to use for effective rate comparisons.

The Right Accounting Method for Pricing

How to use each of the three methods of accounting for pricing. How each method calculates premiums and losses. Which is the single best method for pricing.

Loss Reserves, Product Tails and Loss Development

How reserves are counted and analyzed. Why the length of a product’s tail affects your accuracy. How to calculate loss development and why it is almost never exactly correct. Why judgment and product knowledge are so critical in the calculation.

Trend Analysis and Other Key Calculations

What is trending and why is it used. When do you trend both losses and premiums. Three ways to calculate earned premium at current rate level.

Credibility Analysis – Pros and Cons

What is credibility analysis. Why it is used and how it is determined. What are the problems with this approach. How you can improve your product’s credibility.

The Basics of Rate Making

The four key items you must know to set prices. Why exposure counts are so critical to the pricing process. How to determine appropriate rating variables and properly price each one.

The Rate Revision Process

When is the right time to change rates and by how much. How to actually make the rate change. How to determine the overall change that you have taken. Why the actual results rarely equal the change you tried to take.

When you leave this seminar, you’ll know:

Seminar Program

I. The Basics of Rate Making

A. Risk Selection and Market Segmentation

  1. What makes a good or bad risk
  2. Charging the right rate for the risk
  3. Pricing vs. underwriting
  4. Pricing vs. market based rating
  5. What is market segmentation
  6. Benefits of niche marketing
  7. Three ways to create niche marketing
  8. The golden rule of pricing

B. Rate Making Numbers

  1. The alphabet of rate making
  2. How does an insurance company make money
  3. The impact of investment income

C. The Expense Ratio and its Impact

  1. The permissible loss ratio
  2. How does the expense ratio impact pricing

D. Relativites and Rating Formulas

  1. Why rates alone don’t tell the story
  2. What is a relativity
  3. How to identify relativities within a program
  4. Additive vs. multiplicative rating approaches
  5. The impact of an expense constant
  6. How relativities can create over- and under-pricing

E. Rate Comparison Techniques

  1. The basic rate comparison
  2. Using market basket analysis
  3. Using relativity analysis for comparisons
  4. How to identify adverse selection

II. Rate Making Elements – The Building Blocks

A. Reporting Years

  1. Calendar Year
  2. Accident Year
  3. Policy Year

B. Loss Reserves and their Impact

  1. The importance of reserves
  2. Case reserves
  3. IBNR
  4. Bulk reserves

C. Product Tails

D. Loss Development

  1. Loss development is not a real event
  2. Loss development factors
  3. Loss development triangles
  4. Why do you need an actuary for this

E. Trend Analysis

  1. Why things change
  2. Inflation is more than dollars
  3. Trending losses
  4. Why development and trend are independent
  5. Trending premiums

F. Credibility Analysis

  1. What is credibility all about
  2. How to calculate credibility
  3. Problems with credibility analysis
  4. How to improve your product’s credibility

G. Earned Premium at Current Rate Level

  1. Why do you need to calculate this
  2. The simple approach
  3. The parallelogram method
  4. The spreadsheet method

III. Putting it All Together – The Rate Revision

A. The Concept of Rate Making

  1. The importance of exposures
  2. How to use data to determine proper classifications
  3. Determining proper rating variables
  4. How to determine prices with relativities
  5. How to factor in the competition’s prices

B. The Rate Indication Process

  1. How to determine when a revision is necessary
  2. Determining how much increase (or decrease) is needed

C. Making the Appropriate Changes

D. The Off-Balance Process

  1. Determining the effect of the relativity changes
  2. Adjusting the base rate

E. Why it Never Works Out Exactly

  1. The impact of mix of business
  2. Calculating the real effect of the changes

Comments from recent attendees:

“A clear and concise program essential for product pricing professionals. Very good material with practical exercises.”

Barry LaRue, VP – Product Management
Victoria Insurance Group

“This seminar can literally reduce the ratemaking learning curve from 2 years to 2 days.”

Jay Kampf, Product Manager
Permanent General Insurance Company

“Mr. Dorman is able to separate and explain clearly the components of the rate making process and then tie the components together to allow for an understanding of the entire process.”

Paul Musialowski, Product Development Manager
Merchants Insurance Group

“This course should be mandatory to all persons participating in the rate structure process.”

Ed Oden, Director – Compliance and Filings
Unicare Insurance Company

“Best insurance seminar I’ve ever attended. Powerful 2 days. This seminar took my understanding of the business to another level.”

Carol R. Newman, Senior Vice President
Interstate Insurance Group

“My only regret is that I hadn’t attended this seminar years ago.”

Wally Waldhart, Vice President – Underwriting
Heritage Insurance Company

“A top-notch pricing program that would be helpful for all insurance professionals with responsibility for the rate making process.”

Geoffrey T. Bohanan, Vice President
Worcester Insurance Company

“The class presents critical concepts that are required for my product’s success in this hyper-competitive market.”

Randal Smith, President
Transportation Specialists Insurance Agency

“This seminar should be attended by everyone who is involved in underwriting or rate making, whether a standard, specialty or surplus lines carrier.”

Don Culpepper – President
T.H.E. Insurance Company

“This course is an excellent way to acquaint MGA’s with the process of rate making and accurately pricing an insurance product and becoming a true partner with the insurer.”

Jim Wegner, VP – Product Development
Kenneth I. Tobey, Inc.

“This ranks as the best professional training course I’ve ever taken. Everything was relevant and inspiring.”

Jennifer Daley, Underwriter
Bunker Hill Insurance Company

“Remarkable clarity and simplification of a complex subject.”

Greg Reichert, Vice President – Product Management
Guidant Insurance Group

“No nonsense seminar with time packed with relevant information. Dorman takes his role as instructor very seriously”

Barbara Anderson, Chief Financial Officer
General Fire & Casualty Company

“I learned more about ratemaking in 2 days than I did in 10 years as an underwriter”

David West, Marketing Manager
SAS Institute

“This was one of the best seminars I have attended. You made pricing seem easy and logical”

Doris Dunn – Commercial Field Marketing Manager
Farmers Insurance Companies

“This seminar is a small investment that will pay enormous dividends for insurance professionals who are not actuaries”

Fred Petillo – Assistant Vice President
PIC Wisconsin

Companies whose employees have attended this seminar:

21st Century Ins. Co. First Marine Ins. Co. Norfolk & Dedham Group
A.I.B. Financial Group First Nonprofit Ins. Co. North Carolina Rate Bureau
AAA Missouri First State Mgt. Group Inc. North Pointe Ins. Co.
AAA Southern New England First Trenton Indemnity Co. Northland Ins. Co.
Acadia Ins. Co. Fitchburg Mutual Ins. Co. Norwich Group, Ltd.
Acceleration National Ins. Florida Farm Bureau Ins. Co. Nova Casualty Co.
Accident Fund Co. Florists’ Mutual Ins. Co. Nuclear Electric Ins. Ltd.
Accredited Surety & Casualty Ford Motor Co. Occidental Fire & Casualty
ACUITY Ins. Group Foremost Ins. Co. OHIC Ins. Co.
Addison Farmers Ins. Co. Fortress Ins. Co. Ohio Casualty Group
Administrators for the Professions Founders Ins. Co. Ohio Mutual Ins. Group
Admiral Group PLC Frankenmuth Mutual Ins. Co. Oklahoma Farm Bureau Ins. Co.
Admiral Ins. Co. Freedom General Ins. Svcs. Omaha Property & Casualty Co.
Aegis Security Ins. Co. Fremont Mutual Ins. Co. Omni Ins. Group
Affinity Ins. Services Frontier Ins. Co. One Beacon Ins. Group
Agency Ins. Co. G.J. Sullivan Co. Oregon Mutual Ins. Co.
Agway Ins. Co. Gateway Ins. Co. Orion Specialty Ins. Co.
AI Transport GE Reins. Corp. Oswego County Mutual Ins. Co.
AIG GE/Medical Protective Pa. Lumbermens Mutual Ins.
AIG Agency Auto General Accident Ins. Co. Pacific Indemnity Ins. Co.
AIG Hawaii Ins. Co. General Cologne Re Paragon Ins. Group
AIPSO General Fire & Casualty Co. Patrons Mutual Ins. Co.
AIU North America General Star Mgt. Co. Patterson Ins. Co.
Alaska Muni League Ins. Assoc. Generali US Peace Hills General Ins.
ALFA Ins. Co. Georgia Farm Bureau Ins. Co. Pekin Ins. Co.
All Risks Limited GeoVera Holdings PEMCO Mutual Ins. Co.
Allegany Ins. Co. Gerling Global Re Peninsula Ins. Co.
Allendale Mutual Ins. Co. German Mutual Ins. Co. Penn Millers Ins. Co.
Alliance United Ins. Services Germania Cos. Penn Mutual Ins. Co.
Allied Group Ins. GHS Property & Casualty Penn National Ins. Co.
Allied Ins. Brokers GMAC Ins. Co. Penn-America Ins. Co.
Allmerica Financial Group GMAC Re Permanent General Cos.
Allstate Ins. Co. GoAmerica Auto Ins. Petrosurance Casualty Co.
AMA Ins. Co. Grain Dealers Mutual Ins. Co. Pharmacists Mutual Ins. Co.
Amercian Commerce Ins. Co. Grange Mutual Casualty Co. Philadelphia Ins. Co.
American Access Casualty Grange Mutual Ins. Co. Phoenix Aviation Mgrs.
American Agricutural Ins. Co. GRE Ins. Group Phoenix Indemnity Ins. Co.
American Alternative Ins. Co. Great American Ins. Co. PIC Wisconsin
American Ambassador Casualty Co. Great Northwest Ins. Co. PICA Management Resources
American Century Casualty Co. Great Pacific Ins. Co. Pilgrim Ins. Co.
American Contractors Ins. Group Great River Ins. Co. Pilot Ins. Co.
American Express P&C Ins. Co. Great West Casualty Co. Pinnacol Assurance
American Family Ins. Co. Greater NY Ins. Co. Pioneer State Mutual
American Hallmark Ins. Greenwich Ins. Co. Platinum Group of Cos.
American Honda Finance Corp. Greenwich Transportation Und. Plymouth Rock Assurance
American Interstate Ins. Co. Grinnell Mutual Ins. Co. Pratt Lambert & Brown
American Management Corp. Guaranty National Ins. Co. Preferred Mutual Ins. Co.
American Modern Ins. Group Guardian General Ins. Svc. Premier Ins. Co. of MA
American Reinsurance Co. GuideOne Ins. Group Princeton Ins. Co.
American Reliable Ins. Co. Guy Carpenter Co. Priority One Ins. Co.
American Service Ins. Co. Hannover Re Professional Ins. Underwriters
American Sterling Ins. Co. Hanover Ins. Co. Professional Risk Mgt. Svcs.
AmFed Cos. Harbor Ins. Co. Progressive Corp.
Anchor General Ins. Agy. Hartford Ins. Group Providence-Washington Group
Andover Cos. Hartford Steam Boiler Ins. Co. Prudential Ins. Co.
Aon Corp. Hastings Mutual Ins. Co. Public Risk Underwriters
Arch Ins. Group Hawaii Employers Mutual Quincy Mutual Fire Ins. Co.
ARECA Ins. Exchange Hawaii Insurance Bureau R.I. Medical Society
Argonaut Group HB Group Ins. Mgt. R.J. Wilson & Assoc.
Arkwright Ins. Co. HDR Ins. Svc. Redland Ins. Co.
Armed Forces Ins. Exchange Healthcare Underwriters Mutual Reliance Ins. Group
Arrowhead General Agency Heath Holdings USA Republic Diversified Services
Ass. gen. des caisses Desjardins Highlands Ins. Group Republic Mortgage Ins. Co.
Associates Ins. Group Hochheim Prairie Ins. Group Republic Western Ins. Co.
Assurant Group Home State Cos. Risk Administration Svcs.
Atlanta Casualty Ins. Co. Homesite RLI Ins. Co.
Atlantic Mutual Ins. Co. Horace Mann Group Rockford Mutual Ins. Co.
Austin Mutual Ins. Group IBM Rockingham Ins. Group
Auto Club of So. California IGF Ins. Co. Royal and Sunalliance Group
Auto Club South Ins. Co. Illinois Casualty Co. RSUI Group
Automotive Protection Corp. ILM Group Rural Electric Utilities Und.
AutoOne Ins. Imperial Fire & Casualty Rural Mutual Ins. Co.
AVEMCO Ins. Co. IMT Ins. Co. S.H. Smith & Co.
Aviva Canada INAMAR Safe Auto Ins. Co.
Badger Mutual Ins. Co. Indiana Farmers Mutual Ins. Group SAFECO Ins. Co.
Bankers Independent Ins. Co. Indiana Ins. Co. Safety Ins. Co..
Bankers Ins. Co. Infinity Property & Casualty Safeway Ins. Co.
Bar Plan Mutual Ins. Co. ING Canada Sagamore Ins. Co.
Barton Mutual Group Injured Worker’s Ins. Fund SAIF Corp.
Bear River Mutual Ins. Ins. Corp. of British Columbia SAS Institute
Berkley Medical Excess Und. Ins. Corp. of Hannover SCF Arizona
Berkley Risk Administrators Ins. Program Managers Group Scottsdale Ins. Co.
Berkshire Mutual Ins. Co. Ins. Services, Inc. Seaboard Underwriters
Bertholon-Rowland Ins. Brokers Insurance House Holdings Secura Ins. Co.
Bituminous Ins. Co. Insuremax Ins. Co. Seguros Triple-S, Inc.
BP Capital Mgt. InsurQuote Systems, Inc. Seibel’s Bruce, Inc.
Bremen Mutual Ins. Co. Int’l Excess & Treaty Mgrs. Sentry Ins. Co.
Brethren Mutual Ins. Co. Integon Corp. SGI Canada
Brown & Brown, Inc. Integrity Mutual Ins. Co. Shelter Mutual Ins. Co.
Buckeye Ins. Group Interstate Auto Ins. Co. Signet Star Reins. Co.
Bunker Hill Ins. Co. Interstate Ins. Group Society Ins. Co.
C.L. Frates & Co. Investors Underwriting Mgrs. Sompo Japan Ins.
C.V. Starr & Co. Iowa Mutual Ins. Co. Southern Group Indemnity
CAA Ins. Co. Irwin Siegel Agy. Southern Guaranty Ins. Co.
CalFarm Ins. Co. ISBA Mutual Ins. Co. Southern Mutual Ins. Co.
California Casualty Co. Island Ins. Co. Southern Pioneer Ins. Cos.
California State Auto Assn. IWIF Southern United Fire Ins.
CaliforniaSelect J&H Marsh & McLennan Spring Valley Mutual Ins. Co.
Canal Ins. Co. J&P Holdings Springfield Ins. Co.
Cannon-Cochran Mgt. Svcs. Jefferson Ins. Co. St. Paul Fire & Marine Ins.
Capital City Ins. Co. Jerger Co. Standard Mutual Ins. Co.
Capitol Indemnity Jewelers Mutual Ins. Co. State Auto Ins. Co.
Carvill America JM&A Group State Farm Ins. Co.
Cascade National Ins. Co. John Deere Ins. Co. State National Cos.
Casco Indemnity Co. John L. Corley, Inc. State-Wide Ins. Co.
CCC Information Systems Johnson and Johnson Inc. Sun Coast General Ins. Agy.
Celina Ins. Group Kemper Ins. Group Superior Ins. Co.
Century Surety Group Kenneth I. Tobey, Inc. T.H.E. Ins. Co.
Century-National Ins. Co. Kentucky Farm Bureau Ins. Co. TECIS
CGU Ins. Group Keystone Ins. Co. Tennessee Farm Bureau
Charter Group, Inc. Keystone Surplus Lines Teradata – NCR Corp.
Chrysler Ins. Co. Knight Ins. Group Texas Colonial General Agy.
Chubb & Son Ins. Lake States Ins. Co. Texas Farm Bureau Ins. Co.
Chubb Re LAMMICO Texas Low Cost Ins.
Church Mutual Ins. Co. Le Mars Mutual Ins. Co. The American Agency
CIGNA Ins. Group Lemac & Associates The Doctors Co.
Cincinnati Ins. Co. Lexington Ins. Co. The Ins. Professionals
CIS, Inc. Liberty Mutual Ins. Co. Three Rivers Re
Clarendon National Ins. Group Lighthouse Underwriters TIG Ins. Co.
CNA Ins. Cos. Lincoln General Ins. Co. Titan Ins. Co.
Colonia Underwriters Ins. Co. Longhorn General Agy. TOPA Ins. Co.
Colonial Ins. Co. Louisiana Farm Bureau Ins. Co. Tower Hill Ins. Group
Colorado Farm Bureau Ins. Co. Louisiana General Agy Toyota Motor Ins. Co.
Columbia Lloyds Ins. Co. LWCC Transatlantic Re
Commerce Ins. Co. Maine Employers’ Mutual Ins. TransCom General Agy.
Companion Ins. Co. Maine Mutual Fire Ins. Co. TransGuard Ins. Co.
Concord Group Ins. Co. Maritime General Agency Transport Ins. Co.
Constitutional Casualty Co. Markel Ins. Group Transportation Alliance Bank
Construction Program Group McGraw Group Travelers Ins. Group
Consumers Ins. USA Med James, Inc. Triangle Ins. Co.
Continental National Indemnity MedAmerica Mutual RRG Tri-State Ins. Co. of MN
Coop. de Seguros Multiples Medical Inter-Insurance Exch. U.S. Agents Holding Corp.
Co-operative Fire Ins. MEEMIC U.S. Liability Ins. Group
Cornerstone National Ins. Co. Mendota Ins. Co. U.S. Risk Underwriters
Coulter Insurance Merastar Ins. Co. U.S.Security Ins. Co.
Country Cos. Mercer Ins. Group UniCare Ins. Co.
Creative Risk Merchants Ins. Group Unigard Ins. Group
Cross Country Home Svc Mercury Ins. Co. Union Ins. Co.
CSE Ins. Group Merlino & Schofield, Inc. Union Mutual of VT Cos.
Cumberland Ins. Group MetLife Auto & Home United Automobile Ins. Co.
CUNA Mutual Group Metroplex General Agency United Capitol Ins. Co.
D. Platt & Associates Miami Mutual Ins. Co. United Educators
D.C. Department of Insurance Michigan Millers Ins. Co. United Fire Group
Dairyland Ins. Co. Mid-Continent Group United Underwriters
Deep South Surplus, Inc. Mid-Continent Ins. Co. Unitrin Direct
Delta General Agency Midwest Mutual Ins. Co. Universal Casualty Co.
Diamond Ins. Co. Mile High Markets Universal Ins. Co.
DIA-Tokyo Royal State Ins. Milliman, USA Universal Ins. Co. (PR)
Direct General Corp. Missouri Farm Bureau Ins. Universal Warranty
Discover Reinsurance Co. MMI Cos. US Auto Holdings, Inc.
Distinguished Programs Mo. Employers Mutual Ins. USAA Cos.
DMI Ins. Services Monitor Liability Managers USF&G Cos.
Donegal Ins. Group Montana State Fund Utica National Ins. Group
Dryden Mutual Ins. Co. Mountain States Ins. Co. Vanguard Fire & Casualty Co.
E.W. Blanch Holdings Mountain West Ins. Co. Vanliner Ins. Co.
Electric Ins. Co. MS Farm Bureau Ins. Victoria Fire & Casualty
Employers Re Corp. MSI Ins. Co. Vik Brothers Ins. Group
Encompass Ins. Co. Mutual Benefit Ins. Co. Virginia Farm Bureau Ins.
ePolicy Solutions Mutual of Enumclaw Virginia Mutual Ins. Co.
Equity Ins. Mgrs. MutualAid eXchange Virginia Surety Co.
Erie Ins. Group National American Ins. Co. Vision Ins. Group
Esurance Ins. Co. National American Ins. of CA Wawanesa Mutual Ins. Co.
Everest Security Ins. Co. National Automotive Ins. Co. Wayne Mutual Ins. Co.
Farm Bureau Ins. Co. National Farmers Union P&C WEA Property & Casualty Ins.
Farm Bureau Mutual of AR National Indemnity Co. West Bend Mutual Ins. Co.
Farm Bureau Mutual of IA National Interstate Ins. Co. Western Agricultural Ins. Co.
Farm Bureau Mutual of ID National Merit Ins. Co. Western Marine Ins. Svc.
Farm Bureau Mutual of KS National Org. for Women Western World Ins. Group
Farm Bureau of Michigan National Security Fire & Casualty Westfield Cos.
Farmers Home Group Ins. Nationwide Agribusiness Ins. Wilson Mutual Ins. Co.
Farmers Ins. Co. Nationwide Ins. Co. Windsor Group
Farmers Union Mutual Ins. Nautilus Ins. Co. Wisconsin American Mutual Ins.
Farmland Ins. Co. Navigators Specialty Ins. Co. WNC Ins. Services
FCCI Ins. Group NC Farm Bureau Ins. Co. Wolverine Mutual Ins. Co.
Federated Ins. Co. NCCI Worcester Ins. Co.
Federated Mutual Ins. Co. NCMIC Ins. Co. Workmen’s Auto Ins.
FHM Insurance Group New Mexico Mutual Casualty Co. Wright Risk Mgt.
Financial Indemnity Group Nissan North America XL Environmental
Fireman’s Fund Ins. Co. NJM Ins. Group XL Specialty Ins. Co.
First American Ins. Co. NLC Ins. Co. York Fire & Casualty Ins. Co.
First Auto & Casualty Ins. Co. Nodak Mutual Ins. Co. Zenith Ins. Co.
First Floridian Auto & Home Nonprofits Ins. Alliance of CA Zurich Personal Ins.
First Ins. Co. of Hawaii Norcal Mutual Ins. Co. Zurich U.S.